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British lawmakers to scrutinise executive pay and governance

Friday, September 16, 2016 - 17:35

[LONDON] British lawmakers kept up the pressure on big businesses criticised for boosting top-level salaries whilst not fairly rewarding their workers on Friday with the launch of an inquiry into executive pay and corporate governance.

Newly-appointed Prime Minister Theresa May has denounced as irrational and unhealthy the yawning gap between the amounts paid to bosses and those paid to the average worker, vowing to better align incentives with the long-term interests of firms.

In a speech prior to becoming prime minister, she also suggested making shareholder votes on corporate pay binding and backed the publication of the ratio between a CEO's pay and that of the average company worker.

Although any findings from parliament's Business Innovation and Skills committee are not binding on government, they could add to public pressure for stricter rules on top firms.

"We need to look again at the laws that govern business and how they are enforced," chairman Iain Wright said. "While there has been some recent shareholder actions against these ever larger pay packages, can we have any confidence that the current framework for controlling pay is working?"

The country has seen a resurgence in investor activism in the last year, with several FTSE 100 bosses criticised at annual general meetings for taking ever larger pay deals at a time of weak economic growth.

The average pay of bosses in Britain's FTSE 100 rose more than 10 per cent in 2015 to an average of 5.5 million pounds (S$9.54 million), meaning CEOs now earn 140 times more than their employees on average, according to a survey released in August.

The committee will look into whether executive pay should take into account the long-term performance of firms and the possibility of worker representation on boards.

Lawmakers will also consider ways to boost the number of women in executive positions, with a recent inquiry suggesting that most of Britain's biggest firms are failing to reach a target of 25 per cent of executives being women.